Precision forecasting in perilous times: stock market predictions leveraging google trends and momentum indicators during COVID-19

Abstract

Purpose

This study explores the complex impact of COVID-19 on India's financial sector, moving beyond simplistic public health vs. economy views. We assess market vulnerabilities and analyze how public sentiment, measured through Google Trends, can predict stock market fluctuations. We propose a novel framework using Google Trends for financial sentiment analysis, aiming to improve understanding and preparedness for future crises.

Design/methodology/approach

Hybrid approach leverages Google Trends as sentiment tool, market data, and momentum indicators like Rate of Change, Average Directional Index and Stochastic Oscillator, to deliver accurate, market insights for informed investment decisions during pandemic.

Findings

Our study reveals that the pandemic significantly impacted the Indian financial sector, highlighting its vulnerabilities. Capitalizing on this insight, we built a ground-breaking predictive model with an impressive 98.95% maximum accuracy in forecasting stock market values during such events.

Originality/value

To the best of authors knowledge this model's originality lies in its focus on short-term impact, novel data fusion and methodology, and high accuracy.• Focus on short-term impact: Our model uniquely identifies and quantifies the fleeting effects of COVID-19 on market behavior.• Novel data fusion and framework: A novel framework of sentiment analysis was introduced in the form of Trend Popularity Index. Combining trend popularity index with momentum offers a comprehensive and dynamic approach to predicting market movements during volatile periods.• High predictive accuracy: Achieving the prediction accuracy (98.93%) sets this model apart from existing solutions, making it a valuable tool for informed decision-making.

Citation

Maddodi, S. and Kunte, S.R. (2024), "Precision forecasting in perilous times: stock market predictions leveraging google trends and momentum indicators during COVID-19", Managerial Finance, Vol. 50 No. 10, pp. 1747-1772. https://doi.org/10.1108/MF-02-2024-0128